A foreign subsidiary is a separate legal entity that is established in a foreign country but is controlled by a parent company based in another country. The parent company typically owns more than 50% of the subsidiary's voting stock.
Key Characteristics:
- Separate legal entity under host country laws
- Majority-owned by foreign parent company
- Operates under its own management structure
- Subject to local tax and regulatory requirements
- Maintains separate financial statements
Important: A foreign subsidiary is different from a branch office. Subsidiaries offer limited liability protection while branch offices are considered extensions of the parent company.
Common Subsidiary Structures:
Wholly-Owned Subsidiary (100% ownership)
Majority-Owned Subsidiary (>50% ownership)
Joint Venture (shared ownership with local partner)